The seizure of an Air France plane at Christmas was a dramatic setback after a year of secret French diplomacy between Paris, Algiers and Tehran aimed at containing terrorism within the boundaries of the bitter Algerian civil war.

President Francois Mitterrand is believed to have given his assent to contacts and understandings intended to stop acts of terrorism on French soil or against French targets. But the policy has been undermined by the ebb and flow of influence between theForeign Minister, Alain Juppe, and his hard-bitten Ministry of the Interior counterpart, Charles Pasqua, who favours a direct approach against violent fundamentalism.

Negotiations included successful pressure on Iran to minimise practical support for Muslim insurgents in Algeria. The Iranian government is said by Western officials to have given initial token assistance to the Groupe Islamique Armee (GIA), one of the most violent off-shoots of Algeria's fundamentalist movement.

But diplomats believed - until the events of the past two days - that the activities of the GIA and its comrades had been confined to Algerian domestic targets and to resident foreigners. The attack on an airliner of the French national flag carrier has turned that assumption upside-down and raised the international stakes in the conflict.

For their part, the beleaguered Algerian security services have desperately sought help from France, Britain, Spain and the US. It is understood Britain was unwilling to clamp down on fundamentalist exiles in London unless they broke the law.

By contrast, Islamic militants publicly blame France for providing weapons, intelligence and training to the military-dominated government, which took over after elections were cancelled. French political leaders have long feared the overflow of violencefrom Algeria to France, and Mr Pasqua has proved the apostle of firm containment of the problem.

In a key development, the French government controversially freed Iranian suspects sought by Swiss police for the murder of an Iranian opposition leader near Geneva.

Switzerland made a formal protest to France over the decision, which appeared to breach European conventions on fighting terrorism. Diplomatic sources say the men were allowed to go back to Tehran in exchange for an understanding that Iran would not react to a violent assault by the Algerian security forces against a fundamentalist network in eastern Algeria.